South Korea caught in the middle of US-China chip war, but American export control requests unlikely

The South Korean semiconductor industry relies on the United States for equipment needed to make chips, while China is the sector’s largest export destination

Seoul is reportedly gearing up to join the US-led Chip 4 alliance, but Washington is unlikely ask the government to impose export restrictions, industry insiders say

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South Korea is the world’s second largest semiconductor foundry market, which means its companies manufacture chips that others design. Photo: Bloomberg

Published: 7:00am, 14 Nov 2022

South Korea is facing a complex balancing act as it finds itself positioned in the middle of an intensifying tech war between the United States and its biggest semiconductor chip trading partner China.

The South Korean government has reached a decision internally to join the US-led Chip 4 alliance, and is coordinating the right timing to announce it, an anonymous Korean government insider recently told local media.

Such a decision is in line with a domestic consensus that joining the alliance is inevitable for South Korea, although it is likely to strain relations with China.

Analysts say in the long run South Korea must expand its competitiveness in the fast-changing semiconductor industry landscape, while bonding itself closer to the US and its allies, from which it relies on for equipment, is hard to avoid in the short term.

Experts have downplayed the probability of Washington requesting Seoul to adopt semiconductor export restrictions against China any time soon, something it has asked of Japan and the Netherlands. But intensifying American export controls on chip makers in China are creating a degree of uncertainty for South Korean firms.

Two Korean semiconductor manufacturers that have factories in China, Samsung and SK Hynix, have been granted year-long exceptions from US export restrictions, with no clarity on what will take place once the year ends.

On Tuesday, the two countries’ trade representatives held the first export control working group meeting in Seoul, where the South Korean government expressed concerns about what will happen in a year’s time.

US representative Thea Kendler, who is the assistant secretary of commerce for export administration, said there would be no sudden announcements or surprises within the next year for the South Korean companies.